Taveras Announces Action Plan in Face of Fiscal Emergency

Thursday, March 3, 2011

Mayor takes pay cut, shrinks City workforce, cuts spending.

Exactly two months after taking the oath of office, Mayor Angel Taveras held a press conference releasing the findings of the Municipal Finances Review Panel he commissioned immediately upon taking office. Through Executive Order, Taveras tasked the Panel with conducting a comprehensive review of the City's current fiscal condition.

The findings of the Municipal Finances Review Panel show the true extent of Providence's financial emergency, revealing that this fiscal year's structural deficit is $70 million and next fiscal year's structural deficit is $110 million. Without immediate remediation efforts, the City is expected to end this year with a deficit of as much as $29 million.

Key Findings from the Municipal Finances Review Panel Report:

The City has a severe structural deficit due to its reliance on significant one-time fixes to balance budgets.

This year's structural deficit is $70 million.

Next year's structural deficit is $110 million.

Without immediate remediation efforts, the City is expected to end this year with a deficit of as much as $29 million.

The City's pension plan is severely underfunded - a result of inadequate funding in prior years, generous benefits and cost of living increases, liberal disability pension provisions and the ability to collect benefits at an early age.

The City's annual required contributions into the pension plan are expected to increase dramatically until 2039, when the annual payment is projected at more than $210 million.

A large portion of the City's property is tax-exempt. There is a critical need for tax-exempt property owners to contribute more towards the cost of City services.

Tax collections are projected to fall $4.1 million short of budget.

"When I took the oath of office on January 3, I made a commitment to be honest with the people of Providence about the problems we face. I also promised that I would not shy away from making tough decisions to put our City back on firm financial footing. We are making the tough decisions and taking the immediate actions needed to move Providence forward. Our citizens expect and deserve nothing less," said Taveras.

Based on the panel's findings and in conjunction with other ongoing evaluations of City finances, Taveras today announced the actions he would take immediately to begin to address the fiscal challenges facing Providence. These actions include the following:

Effective immediately, the Mayor is taking a 10% pay cut.

The Mayor will submit a FY12 budget that cuts the Mayor's office payroll by 10%.

Effective immediately, 13 non-union positions, including several school administration positions, have been eliminated - resulting in $1.7 million in savings to the City.

Department Directors have been instructed to submit budgets for next year that reflect at least a 10-15% overall reduction.

Four to six schools will be closed and a number of teacher positions will be eliminated. On Tuesday, the Mayor published a timeline for the process by which schools will be recommended for closure.

There will be an immediate review and freeze on all non-essential spending and hiring across City departments. Numerous unfilled positions will remain vacant and will be eliminated from next year's budget. Moving forward, all hiring decisions must be approved by Director of Administration Michael D'Amico and Chief of Staff John Pagliarini.

There will be an immediate review and renegotiation of contracts with third-party vendors.

The City has cancelled its contract with a benefits administration company. This contract cost the City $1.4 million last year. By bringing this service in-house we have created an annual savings of $900,000.

The City will seek to renegotiate union contracts to produce cost savings.

The City will negotiate with tax-exempt universities and hospitals to increase support for the City.

The City will lobby the State to fully implement the Statewide Education Funding Formula.

The Taveras administration will accelerate the consolidation of City departments and services. This process is underway and next year's budget will reflect efforts to cut costs while streamlining City services and making it easier for citizens to access government.

The Taveras administration will actively pursue pension reform.

Providence will aggressively pursue short- and long-term opportunities to work with neighboring cities and towns to make regionalization of services a reality.

The Taveras administration will work in close collaboration with the City Council, the State and the community to pursue new ideas for reducing spending.

Mayor Taveras pledged to move through a fiscal remediation and budgeting process in a way that enables citizens to get involved and stay engaged. His plan includes neighborhood meetings, and an easy-to-use website where residents can find accurate and timely information, and share feedback.

"The Municipal Finances Review Panel's findings clearly reveal that the City's existing fiscal foundation is crumbling and is not sustainable. We must work together to build a foundation for a new Providence - one that is based on transparency and fiscal responsibility, and that ensures the future prosperity of our great City," said Taveras.